Investing in Stocks
What is a stock?
A stock is a measure of value constituted from a corporation after its liabilities are deducted from its assets. Therefore, a single share is a portion of the value of the corporation rendered to a shareholder. There are two types of stocks:
1. Common stock
Common stocks are the type of stocks which people are very familiar with.They claim part of the profits a company obtains which is referred to as dividends. A potential investor should check the performance of a company before buying their stocks.
Moreover, an investor can earn a lot of income from this investment for it is not fixed. A common stock grants a shareholder a chance to vote for their board members.
2. Preferred stock
Preferred stock are a bit different from common stocks. They minimize the risk of losing income as shareholders are given an upper hand when it comes to payment during occurrences such as bankruptcy.
A preferred stock also comes with a fixed return in form of dividends. This is a disadvantage as it hinders a shareholder from acquiring more income once the company is at its best.
Choosing the appropriate company stocks.
This is one major step requiring a serious evaluation to give positive results. There are various factors to consider to genuinely come up with the best list of companies to place your best bet on and wait for your score. Here are the factors:
A matter of taste and preference.
Picture yourself as a customer walking into a certain business premise in search of a specific service provision. What’s has driven you into this place? Why not go elsewhere with the same service being sold?
A company does well if many of its customers are satisfied fully by its goods and services provided in their target market.
People invest in companies which barely have a view of their future. Some companies don’t even have a vision of how they’ll make more profits or expand in the near future.
Therefore it’s better to give thought into it before rushing into what many people are getting themselves into.
Value of the stock
A company growing quickly in the economy will have a costly stock compared to a company whose growth is much slower. Its stock will be much cheaper.
Moreover, sometimes a stock which is priced higher shows a company is expected to do well in the nearby future. Check into the stock’s price and the performance of the company.
Dig deeper into the company’s reports both recent and from the past. Familiarize yourself with the company’s new affairs and state.
Is the current management very productive? Is the management new? Has there been a change in roles recently and why?
In addition to this, check whether the company has a lot of financial freedom or is constrained by debts. A company with huge amount of debts can be a sinking ship slowly submerging into the deep seas of bankruptcy.
Another way of getting insight of the company’s performance is tracking their payments to their shareholders. The dividends the issue as part of profits should help you monitor the company’s financial ability and health in the market they serve.
With your statistics you’ve gathered, ask yourself whether the company is worth investing in and make the right choice.
Here are tips on what to avoid when purchasing a company stock:
- An analyst’s insight – Analysts offer their own reports on how several companies are performing in the economy. These reports could share significant information on the companies in depth.
However, sell ratings from analysts could be an alarm to keep off. This is as a result of them being biased for these buying ratings.
- Shift in price – A stock can be inconsistent as it can shift in prices in several times of the year. Buying blindly can be problematic to you once you choose to sell the stocks. Have a general look on the extent the prices could swing from its current state to its extreme lows and highs.
- Selling the stock – come with a strategy to help you sell the stock at the appropriate time. This is to avoid panic at certain times of the year based on the company’s performance.
Choosing a stock broker.
Picking the right stock broker isn’t an easy task as it requires proper weighing of options and suitability to work to your advantage. Furthermore, this exercise also depends on how far you are willing to go financially. It is advisable to go for an option favoring you in the best possible way without you being limited. There are different types of brokers to work with. They are:
- Insurance broker- They work with insurance companies to help an investor acquire the best possible deals.
- Real Estate broker- Helps an investor acquire or sell assets or property.
- Discount broker- They give services at a much deducted commission.
- Full-service broker- They go an extra mile from the discount broker to give financial advice and guidance to investors.
Here are the key areas to look into for you to successfully select your stock broker:
- Minimum balance – find out the minimum balance your stock broker is going with for your stock account. This will help you find the right person for you to work with financially.
- Withdrawals – For you to make withdrawals, brokers will need to charge you some fees for it. Moreover, these withdrawals can only be done if they don’t fall below the minimum balance required in your account.
- Margin accounts- These accounts possess a slightly higher minimum balance than the beginner accounts. Check the interests they will bare you in future if you choose to open one later on.
- Fee structure – Check the fee structure of the broker before you make your final choice. This is because some use complicated ones to deceive their clients and drain more resources from them. This will also prove if they are legit and easy to work with.
There are many ways you can invest in Singapore. Some places are like Fund Supermart. There is a lot of convenience by investing through them. You are able to create an account easily and transfer funds in to make any transaction.